Legal costs can often be a point of concern or dispute. Clients may sometimes feel that the charges are too high, unreasonable, or not adequately explained. Under the Solicitors Act 1974, clients have the right to request a detailed assessment of their solicitor’s bill by the court if they believe the fees are excessive or unfair.

The case of Tim Martin Interiors Ltd v Akin Gump LLP is important for disputes over solicitor costs because it clarifies several key principles regarding how legal fees are assessed, particularly when third parties are involved in paying those fees.

Litigation finance, funding arrangements and insurance allow clients to pursue claims whilst reducing financial risks. At Annecto Legal, we can assist clients by helping them secure funding and insurance for their cases.

Tim Martin Interiors Ltd v Akin Gump LLP

Tim Martin Interiors Ltd v Akin Gump LLP [2011] was a decision by the High Court of England and Wales (Chancery Division). In the case, the Respondent had borrowed money from a bank, securing the loan with a mortgage guaranteed by two of its directors. After the Respondent defaulted on the loan, the bank instructed the Appellant, a solicitors’ firm, to enforce the mortgage and recover possession of the property.

The Respondent was liable to pay the bank. This debt included over £100,000 in legal fees owed to the Appellant. Subsequently, the bank transferred the mortgage to one of the Respondent’s directors (also a guarantor) in exchange for a payment that covered the costs incurred, including the legal fees. The bank then paid the Appellant’s fees in full.

The Respondent later initiated proceedings under section 71 of the Solicitors Act 1974 to challenge the Appellant’s bill of costs. During the third party assessment under Section 71, the Master reduced the Appellant’s hourly rate, lowering the total bill, and ordered the Appellant to refund the difference to the Respondent.

On appeal, the matter was remitted to another costs judge. The court overturned the Master’s decision. It clarified that a solicitor’s fees are governed by the retainer (the contract between the solicitor and their client) and that the client alone is responsible for those fees. The solicitor is not involved in any arrangements that shift the client’s liability to a third party, as happened in this case.

As such, the solicitor’s right to recover fees should not be affected by such arrangements. The court emphasised that the third party (the Respondent) could only challenge the solicitor’s fees on grounds that the original client (the bank) could have raised.

The court also ruled that the Appellant’s agreed hourly rate could not be interfered with, as it was part of the contract between the Appellant and the bank, and the bank had already accepted it. The Master’s error lay in assessing the costs as between the bank and the Respondent, rather than between the Appellant and the bank, which should have been the focus.

However, the Court of Appeal has since clarified the application of Section 71(3) of the Solicitors Act 1974, which governs the assessment of costs in cases involving third parties like trustees or estate beneficiaries.

In subsequent interpretations, courts distinguished the Tim Martin precedent, emphasising that Section 71(3) allows broader discretion compared to Section 71(1). Recent rulings affirmed that beneficiaries or trustees have unique rights to challenge solicitor fees, especially when fiduciary relationships are involved. This marks a shift from the narrow contractual view applied in Tim Martin, recognising the need to protect third-party interests in fiduciary contexts​.

These developments expand the scope for challenging solicitor fees, especially in complex scenarios involving estates and third-party payers. They underscore the importance of transparency in fee agreements and ensure fair assessments in fiduciary disputes.

Commercial litigation funding

Commercial litigation funding can be a valuable tool when disputing solicitor costs, especially in cases where the client feels the fees are excessive but lacks the financial resources to challenge them through legal proceedings. Some of the commercial litigation funding methods available include:

• After-the-event (ATE) legal insurance– ATE insurance is generally used to protect from adverse costs risks & Security for Costs requirements. After-the-event (ATE) legal expenses insurance is perhaps best thought as a similar to a ‘swap’. For either no upfront fee or a small upfront fee, the insurer takes on all of the risk of the potential adverse costs award.

The claimant has swapped their obligation to pay the defendants in the event of a loss, with the obligation to pay the insurer in the event of a win. This ‘swap’ is generally an attractive swap as the client is likely to be in a better financial position following a win than following a loss. Also, the payment to the insurer will only be a percentage of the adverse costs rather than the whole amount.

• Third party litigation funding– In some cases, third party litigation funders may be willing to provide funding for a claim in exchange for a share of any financial settlement or damages awarded. This option can be attractive when there are no funds to pursue a strong case. ATE insurance is often used in conjunction with this type of funding.

How can Annecto Legal assist?

When handling disputing solicitor costs, clients should explore all options available to them. At Annecto Legal, we assist a wide range of clients in finding the appropriate litigation funding and after-the-event (ATE) insurance.

Annecto Legal regularly assists clients who are involved in dealing with solicitor costs. If you are looking to challenge your solicitor regarding costs and want to find out whether we can assist you in helping you secure the right deal, then contact Annecto Legal now.